30 Million New Jobs In 5 Years? Yes We Can!
Another summer, with job growth lagging population growth? That's bad. A closer look at the long-term historical data reveals something far more disturbing. We're 30 million jobs short of full employment. Can we put 30 million people to work in the next five years, and end this economic malaise? Yes, we can.
The answer was suggested a half-century ago by Milton Friedman: replace most social welfare programs with a negative income tax. A minimum wage punishes willing employers and willing employees. In an effort to force employers to pay a "fair" wage to our least skilled, we erect insurmountable barriers to employment for many potential employees.
But first, who comprises our 30 million? It seems sensible to assume that just as many working age men and women could work today as in the past. After all, we're living longer and healthier than ever. In the 1950s, up to 93% of working age men (age 20-65) were gainfully employed, with another 2% to 3% looking for work. Today, just 75% of all men, age 20-65, have jobs. That's not 9% unemployment. That's 18%. For working-age men, barely 70% have full-time jobs, shockingly close to the Great Depression lows.
As women came into the workforce, by the late 1990s, over 70% of all working age women held jobs; today, this figure is below 65%. Nearly 8% of those with jobs are part-time, but want full-time work; this is more than twice as many as past norms. This puts current full-time employment below the 2009 lows.
Suppose 93% of all working age men and 70% of all working age women could work, merely matching past employment levels. With 190 million people between 20 and 65, that's 154 million jobs, 25 million more than today. Suppose we could create full-time jobs for all of these individuals, plus half of the 10 million who are underemployed. This tops us up to 30 million new full-time jobs. Impossible? Not at all.
What prevents this growth? Anything that discourages someone from taking a job and anything that discourages an employer from offering one. Pay someone not to work, and they're less likely to work. Create costly obligations for employers, or make it difficult to fire people who aren't earning their keep, and employers are less eager to hire people. Prohibit employment at a "market clearing" price, and anyone whose skills would not justify minimum wage will find no offers.
Consider Emily, a high-school dropout with no experience and no skills, looking to reset her life by earning her GED and seeking her first ever job. Suppose an employer would be happy to try her out at $1/hour. Is it fair to require the employer to pay $8/hour, give or take, for an untested employee who has never had a job? No. Will she get any offers at $8/hour? Probably not. Is it fair to deprive her of a chance to garner her first-ever job, perhaps locking her into permanent unemployment? No.
Is it fair to ask her to support herself on $1/hour? No. Instead of forcing a reluctant employer to pay Emily more than she is worth, suppose her paycheck includes $1/hour from the employer and $7/hour from the IRS. She's still taking home the minimum wage. Will she care that $7 of her hourly wage comes from the IRS? No. As she develops skills and demonstrates a strong work ethic, she'll command a higher wage - if not from her current employer, then from a new employer! With each raise, the subsidy from the IRS drops; she keeps perhaps 70 cents of each dollar raise. A flat tax. In time, as her skills improve she's making enough to pay taxes, instead of collecting a negative income tax subsidy.
Can we find employers willing to hire 30 million people for $1/hour, wages that rise as the job skills improve? Of course we can. As these low-wage employees learn skills and earn raises, tax revenues will grow, the costs of our social programs will decline and long-term liabilities for entitlements will fall. No doubt there would be a lot fewer bitter unemployables, too. Plus, with opportunity, we will see the occasional meteoric rise from the mailroom to the corner office.
Unaffordable? Hardly. Do the math: the initial cost would be far less than the latest stimulus proposal. To be sure, we still have half of the populace receiving support and the other half paying for it. But, we no longer have disincentives to employ the undereducated or the unskilled. Everyone has an incentive to work harder and to earn more.
This should not be a partisan issue. Which party wants to tell Emily that we prefer for her not to enter the workforce, first at a low market-clearing price, then to earn more with mentoring and hard work? Who wants to tell Emily that we want her to become part of a permanent underclass, and that the American Dream can never be her dream?
